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Introducing an independent carbon price floor could devastate UK industry’s ability to compete in Europe and harm the bloc’s efforts to cut emissions, warn MPs.
The Treasury’s plans to set a price for a tonne of carbon above that set by the EU emissions trading scheme (ETS) have been labeled a revenue-raising exercise that will not help to encourage the deployment of renewable energy and risks off-shoring emissions to other EU countries by the energy and climate sub-committee.
In its latest report examining the ETS, the committee concludes that the scheme has the potential to produce real environmental benefits and promote international action on climate change. However, it claims that individual action by member states, such as the UK’s planned carbon price floor, will undermine its effectiveness. Higher carbon prices in the UK will artificially raise the price of electricity, according to the report, creating an incentive for heavy industries to relocate operations and to import more electricity from the continent.
“The policy risks the economic future of conventional electricity generation in the UK, effectively subsidising higher fossil fuel emissions elsewhere in Europe,” it states. Tim Yeo, chair of the committee, warned: “Unless the price of carbon is increased at an EU-wide level, taking action on our own will have no overall effect on emissions other than to out-source them.
“A revenue raising exercise disguised as a green policy won’t help anybody - the price of carbon has to be increased at an EU level to kick start investment in clean energy.”
While a Treasury spokesperson defended the government’s plans, saying the carbon price floor was vital in reducing uncertainty for investors in low-carbon electricity generation, the committee’s conclusions have been welcomed by industry representatives.
